PING KAI ENGINEERING CO. LTD. v. HONG KONG TEAKWOOD WORKS LTD.

HCCT 2/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO.2 OF 2001

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REASONS   FOR    DECISION

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THE ORDER MADE ON 23 JANUARY 2002

1. By a Summons dated 21 December 2001, the plaintiff applied, in part, to strike out the following parts of the Defence and Counterclaim :-

"(i) the words 'alternatively an implied' in paragraph 5;

(ii) paragraph 6;

(iii) paragraph 9;

(iv) paragraph 16;

(v) paragraph 17,"

2. The plaintiff also applies for summary judgment but this part of the Summons has been adjourned with directions for further evidence to be filed.

3. After hearing arguments on the strike out application on 23 January 2002, I granted an order striking out the said parts of the Defence and Counterclaim set out above as well as paragraph 2 of the Prayer of the Counterclaim. I also ordered that the costs of this application be to the plaintiff, to be paid by the defendant on an indemnity basis, such costs to be taxed if not agreed.

THE ISSUE

4. The issue before the Court is simply whether the Court should strike out, in this case parts of a party's pleading, for failure to comply with an unless order.

BACKGROUND

5. The plaintiff's claim, as set out in the Statement of Claim, is for the sum of $3,227,935.10 said to be the balance due for carrying out and completing fitting out works for a residential development at 1 Wun Sha Street, Hong Kong pursuant to a contract and subsequent variation works agreement between the plaintiff and the defendant. An invoice dated 14 November 2000 was sent by the plaintiff to the defendant for settlement. This invoice set out the details of how the said sum was arrived at. The plaintiff also claims against the defendant as the drawer of two dishonoured cheques in the respective sums of $100,000 and $150,000. The Writ was issued on 7 December 2000.

6. The Defence and Counterclaim dated 22 January 2001 pleads in part as follows :-

"5. If which is denied, there was any binding agreement or agreements between the Plaintiff and the Defendant, it was an express alternatively an implied condition of any agreement that the fitting out works should be completed to the satisfaction of the Architect by 20 September 1999.

6. In breach of the said condition the Plaintiff failed to proceed diligently with the works and did not complete the bulk of same until 10 October 1999.

...

9. Moreover, in further breach of contract the Plaintiff failed to complete defects rectification within a reasonable time and/or within the defect liability period or at all and as a result the Architect has refused to release retention monies and the Defendant has suffered loss and damage.

...

16. By reason of the said matters, the Defendant has suffered loss and damage.

Particulars of loss and damage

Liquidated damages due to delay in completion of works (HK$40,000.00 per day x 20 days) for which HK$800,000.00 the Plaintiff is responsible.

17. Costs of rectifying defects by use of alternative contractors, substituted labour. (full details of which will be provided after interrogatories and/or discovery herein, and which is continuing)."

7. The Prayer of the Counterclaim seeks the following relief :-

"1. The sum of HK$1,571,054.72;

2. Further and/or in the alternative damages to be assessed."

8. A Request for Further and Better Particulars of the Defence and Counterclaim was made by the plaintiff on 15 May 2001. By an Answer dated 5 June 2001 ("the 1st Answer"), the defendant sought to provide the Further and Better Particulars requested.

9. Insofar as relevant, the 1st Answer contained the following :-

"Under Paragraph 5 of the Defence and Counterclaim

Of the allegation that 'it was an express alternatively an implied condition of any agreement that the fitting out works should be completed to the satisfaction of the Architect by 20th September 1999'.

Request 1

(1) In so far as it is alleged that it was an express condition, state whether it is alleged that the same was agreed orally or in writing.

Answer

In writing

(2) If orally, state where and when, and the persons acting respectively on behalf of the Plaintiff and the Defendant through whom, the same was alleged to have been agreed.

Answer

Inapplicable

(3) If in writing, identify the document alleged to contain or evidence the same.

Answer

The Sub-contract dated 24th October 2000 made between Wing Hong Construction Limited and the Defendant ('the Sub-contract') and a letter from the Plaintiff dated 14th October 2000.

Request 2

In so far as it is alleged that it was an implied condition, state the basis on which the same is alleged to have arisen by implication, with full particulars of all he alleged facts and circumstances relied upon in support of any such implication.

Answer

See Answer (3) above.

Under paragraph 6 of the Defence and Counterclaim

Of the allegation that the Plaintiff in breach of the said condition 'did not complete the bulk of the same [the works] until 10th October 1999'.

Request 3

Give full particulars of all aspects or parts of the works alleged to have remained uncompleted by (1) 20th September 1999 and (2) 10th October 1999.

Answer

(1) and (2) beech wood strip flooring and skirting. Further particulars will be given after discovery.

...

Under paragraph 9 of the Defence and Counterclaim

Of the allegation that 'in further breach of contract the Plaintiff failed to complete defects rectification within a reasonable time and/or within the defect liability period or at all and as a result the Architect has refused to release monies and the Defendant has suffered loss and damage'.

Request 5

...

(4) If in writing, identity the document alleged to contain or evidence the same.

(5) In so far as it is alleged that it was an implied condition or term, state the basis on which the same is alleged to have a risen by implication, with full particulars of all the alleged facts and circumstances relied upon in support of any such implication.

...

(4) Special Conditions of the Sub-contract

(5) See (4) above

...

Under paragraph 17 of the Defence and Counterclaim

Of the alleged 'Costs of rectifying defects by use of alternative contractors, substituted labour'.

Request 16

Give full particulars of all such alleged costs, identifying in relation to each 'defect' allegedly being rectified.

(1) the 'defect' being rectified;

(2) the rectification work done;

(3) the identity of the 'alternative contractor(s)'.

(4) the 'substituted labour' used.

Answer

The full details of costs will be provided after discovery."

10. Not satisfied with these answers, the plaintiff made a further request on 22 June 2001. The defendant refused to provide the particulars sought. By an Order made by Burrell J on 27 July 2001, the defendant was ordered to provide the Further and Better Particulars for the original requests 2, 3, 5(5) and 16, and also Further and Better Particulars of the Further and Better Particulars provided under the 1st Answer.

11. The defendant sought to comply with the 27 July 2001 Order by serving two sets of Answers both dated 17 August 2001 ("the 2nd Answer").

12. The Further and Better Particulars provided in the 2nd Answer were as follows :-

Answer to the original Request for Further and Better Particulars of the Defence and Counterclaim

"Under Paragraph 5

"Of the allegation that 'it was an express alternatively an implied condition of any agreement that the fitting out works should be completed to the satisfaction of the Architect by 20th September 1999'.

Request

2. In so far as it is alleged that it was an implied condition, state the basis on which the same is alleged to have arisen by implication, with full particulars of all the alleged facts and circumstances replied upon in support of any such implication."

Answer

A fax from the Defendant to the Plaintiff enclosed a construction programme indicated that the fitting out Contract shall be completed in the 1st week of September 1999. This implied that the Plaintiff had sufficient knowledge of the completion date. A letter from the Plaintiff to the Main Contractor dated 14th October 2000 (should be 14th October 1999) also acknowledged that the contractual completion date was on 16th September 1999.

Under Paragraph 6

Of the allegation that the Plaintiff in breach of the said condition 'did not complete the bulk of the same [the works] until 10th October 1999'.

Request

3. Give full particulars of all aspects or parts of the works alleged to have remained uncompleted by (1) 20th September 1999 and (2) 10th October 1999.

Answer

(1) and (2) beech wood strip flooring and skirting and marble floor to typical bathroom.

Under paragraph 9

Of the allegation that 'in further breach of contract the Plaintiff failed to complete defects rectification within a reasonable time and/or within the defect liability period or at all and as a result the Architect has refused to release monies and the Defendant has suffered loss and damage'.

Request

5.(5) In so far as it is alleged that it was an implied condition or term, state the basis on which the same is alleged to have arisen by implication, with full particulars of all the alleged facts and circumstances relied upon in support of any such implication.

Answer

A fax from the Defendant to the Plaintiff dated 3rd September 1999 enclosing a letter from the Employer to the Architect dated 2nd September 1999 urging the Defendant to complete the outstanding defects immediately failing which all costs and damages incurred shall be fully borne by the Defendant. A payment certificate from the Architect dated 3rd January 2001 indicated that an amount of HK$339,500.00 was withheld for retention and was not to be released until making good of all defects.

Under paragraph 17

Of the alleged 'Costs of rectifying defects by use of alternative contractors, substituted labour'.

Request

16. Give full particulars of all such alleged costs, identifying in relation to each 'defect' allegedly being rectified :

(1) the 'defect' being rectified;

(2) the rectification work done;

(3) the identity of the 'alternative contractor(s)';

(4) the 'substituted labour' used.

Answer

The full details of costs have been requested from the Main Contractor."

Answer to the Request for Further and Better Particulars of the 1st Answer

"Under Answer to Request 7

Of the answer 'The length of reasonable time and its commencement were determined by the Main Contractor in the circumstances'.

Request

...

5. State whether any such alleged determination(s) by the Main Contractor is/are being relied upon by the Defendant in this Action and if so, for each such alleged determination :

(1) state the length of the reasonable time, including when did the same commence and end;

(2) Whether the determination was made by the Main Contractor orally or in writing :

(a) if orally, state where and when, and the natural persons by whom the determination was communicated and received;

(b) if in writing, identify the document alleged to contain or evidence the same;

(3) state with full particulars the defects in relation to which the determination was made.

Answer

5.	(1) The reasonable time for making good the defects depended upon each particular item of defects. As per the usual custom and practice in the construction industry, a defect shall be made good within two weeks from the notification of the Employer and/or Architect.
	(2) Orally. Wun Sha Street Site by Project Manager of the Main Contractor and the Defendant on divers dates. The time depended on the circumstances for each particular item of defective work but as a general rule was two weeks.
	(3) These particulars have been requested from the Main Contractor."

13. Not surprisingly, the plaintiff was not satisfied with these Answers either. By a Summons dated 12 October 2001, the plaintiff sought an Unless Order to the effect that unless full and proper particulars were provided within seven days of any order made, those parts of the Defence and Counterclaim referred to in the present Summons before me should be struck out.

14. On 3 December 2001, Burrell J ordered that :-

"1. unless the Defendant by 4 p.m. on Monday, the 17th December 2001 file and service full and proper further and better particulars of the Defence and Counterclaim as requested under :

(a) requests 2, 3, 5(5) and 16 of the Request for Further and Better Particulars of the Defence and Counterclaim dated 15 May 2001, and

(b) request 5 of the Request for Further and Better Particulars of the Answer to the Request for Further and Better Particulars of the Defence and Counterclaim, dated 22 June 2001,

the following parts of the Defence and Counterclaim, that is :

(i) the words 'alternatively an implied' in paragraph 5;

(ii) paragraph 6;

(iii) paragraph 9;

(iv) paragraph 16;

(v) paragraph 17,

be struck out; ..."

15. In purported compliance with this Order, on 17 December 2001, the defendant provided the following Further and Better Particulars ("the 3rd Answer") :-

"Under Paragraphs 5

Of the allegation that 'it was an express alternatively an implied condition of any agreement that the fitting out works should be completed to the satisfaction of the Architect by 20th September 1999'.

Request

2. In so far as it is alleged that it was implied condition, state the basis on which the same is alleged to have arisen by implication, with full particulars of all the alleged facts and circumstances relied upon in support of any such implication.

Answer

A fax from the Defendant to the Plaintiff enclosed a construction programme indicated that the fitting out Contract shall be completed in the 1st week of September 1999. This implied that the Plaintiff had sufficient knowledge of the completion date. A letter from the Plaintiff to the Main Contractor dated 14th October 2000 (should be 14th October 1999) also acknowledged that the contractual completion date was on 16th September 1999. (Same answer as to the ANSWER TO REQUEST FOR FURTHER AND BETTER PARTICULARS OF THE DEFENCE AND COUNTERCLAIM filed on 17 August 2001.)

Under Paragraph 6

Of the allegation that the Plaintiff in breach of the said condition 'did not complete the bulk of the same [the works] until 10th October 1999'.

Request

3. Give full particulars of all aspects or parts of the works alleged to have remained uncompleted by (1) 20th September 1999 and (2) 10th October 1999.

Answer

Works remained uncompleted by (1) and (2) are:

1. Wood strip flooring to typical bathrooms.

2. Wood strip skirting to typical bathrooms.

3. Marble floor to typical bathrooms.

4. Sanitary fittings to typical bathrooms.

5. Door frames to toilet cubicles at 6/F male and female changing rooms.

Under paragraph 9

Of the allegation that 'in further breach of contract the Plaintiff failed to complete defects rectification within a reasonable time and/or within the defect liability period or at all and as a result the Architect has refused to release monies and the Defendant has suffered loss and damage'.

Request

5.	(5) In so far as it is alleged that it was an implied condition or term, state the basis on which the same is alleged to have arisen by implication, with full particulars of all the alleged facts and circumstances relied upon in support of any such implication.

Answer

A fax from the Defendant to the Plaintiff dated 3rd September 1999 enclosing a letter form the Employer to the Architect dated 2nd September 1999 urging the Defendant to complete the outstanding defects immediately failing which all costs and damages incurred shall be fully borne by the Defendant. A payment certificate from the Architect dated 3rd January 2001 indicated that an amount of HK$339,500.00 was withheld for retention and was not to be released until making good of all defects. (Same answer as to the ANSWER TO REQUEST FOR FURTHER AND BETTER PARTICULARS OF THE DEFENCE AND COUNTERCLAIM filed on 17 August 2001.)

Under paragraph 17

Of the alleged 'Costs of rectifying defects by use of alternative contractors, substituted labour'.

Request

16. Give full particulars of all such alleged costs, identifying in relation to each 'defect' allegedly being rectified :

(1) the 'defect' being rectified;

(2) the rectification work done;

(3) the identity of the 'alternative contractor(s)';

(4) the 'substituted labour' used.

Answer

See Schedule Attached."

16. Following the 3rd Answer, the plaintiff applied by the present Summons to strike out those parts of the Defence and Counterclaim to which I have already referred.

THE APPLICABLE PRINCIPLES

17. The function of particulars is to inform an opponent of the case he has to meet at trial : see Hong Kong Civil Procedures 2002 at paragraph 18/12/1. Thus, the provision of full and proper particulars not only enables the parties and the Court properly to prepare for trial, it also serves the important function of encouraging settlement. Settlements rarely occur without each side knowing the full and precise extent of the case made against him.

18. Further and better particulars are therefore important features of the system of litigation governed by the Rules of the High Court. It comes then as no surprise that unless orders are not infrequently made for the provision of such particulars.

19. The consequences of a failure to comply with an unless order for the provision of further and better particulars are the same as in any other situation in which unless orders are made : see Hong Kong Civil Procedures 2002 at paragraph 18/12/58.

20. In Grand Metropolitan Nominee (No. 2) Company Limited v. Evans [1992] 1 WLR 1191, a case concerning an unless order in relation to the provision of further and better particulars, the English Court of Appeal reaffirmed the applicable principles contained in the judgment of Sir Nicholas Browne-Wilkinson VC in Re Jokai Tea Holdings Limited (Note) [1992] 1 WLR 1196 in which he said at page 1203,

"In my judgment, in cases in which the court has to decide what are the consequences of a failure to comply with an 'unless' order, the relevant question is whether such failure is intentional and contumelious. The court should not be astute to find excuses for such failure since obedience to orders of the court is the foundation on which its authority is founded. But if a party can clearly demonstrate that there was no intention to ignore or flout the order and that the failure to obey was due to extraneous circumstances, such failure to obey is not to be treated as contumelious and therefore does not disentitle the litigant to rights which would otherwise have enjoyed."

21. More recent guidance on this topic is given in Hytec Information Systems Limited v. Coventry City Council [1997] 1 WLR 1666, another decision of the English Court of Appeal cited with approval by the Hong Kong Court of Appeal in Lessy SARL v. Pacific Star Development Limited [1997] HKLRD 1248. I need to refer only to the following passage in Ward LJ's judgment at 1674 :-

" In the light of my observations that each case really should be cited upon its own facts, it may be otiose to try and encapsulate what I understand to be the philosophy underlying this approach. It seems to me it is as follows.

(1) An unless order is an order of last resort. It is not made unless there is a history of failure to comply with other orders. It is the party's last chance to put his case in order. (2) Because that was his last chance, a failure to comply will ordinarily result in the sanction being imposed. (3) This sanction is a necessary forensic weapon which the broader interests of the administration of justice require to be deployed unless the most compelling reason is advanced to exempt his failure. (4) It seems axiomatic that if a party intentionally or deliberately (if the synonym is preferred) flouts the order then he can expect no mercy. (5) A sufficient exoneration will almost inevitably require that he satisfies the court that something beyond his control has caused his failure to comply with the order. (6) The judge exercises his judicial discretion in deciding whether or not to excuse. A discretion judicially exercised on the facts and circumstances of each case on its own merits depends on the circumstances of that case; at the core is service to justice. (7) The interests of justice require that justice be shown to the injured party for the procedural inefficiencies caused by the twin scourges of delay and wasted costs. The public interest in the administration of justice to contain those two blights upon it also weighs very heavily. Any injustice to the defaulting party, though never to be ignored, comes a long way behind the other two."

22. Accordingly, where there has been a failure to comply with an Unless Order, the Court proceeds on the footing that the sanction stated in the Order will be imposed (i.e. striking out in the present case). It will not do so where the party in default (and it is important to stress that the burden is on him) to demonstrate with cogent and compelling evidence that the failure was not intentional or contumelious and was caused by circumstances beyond his control. Invariably, I would have thought that an affidavit would be essential if any explanation is sought to be given for, as is obvious, a court would attach more weight to sworn evidence than evidence either unsworn or simply given from counsel's table.

THE PRESENT CASE

23. It is first necessary to determine whether there has been a failure to comply with the Unless Order made by Burrell J on 3 December 2001. In my judgment, it is clear that there has been a failure.

Under the original Request for Further and Better Particulars

(1) Request 2

24. In the 3rd Answer, the defendant has provided the same particulars as in the 2nd Answer. I was told that at the hearing before Burrell J on 3 December 2001, no submissions were made on the defendant's behalf to the effect that the Further and Better Particulars provided in the 2nd Answer were adequate. In any event, implicit in Burrell J's Order is a finding that they were not adequate. There is clearly a failure in these circumstances to answer this request properly.

(2) Request 3

25. The Further and Better Particulars provided in the 3rd Answer expand on the previous Answers given merely by listing two more items. What is missing (and presumably this was why Burrell J regarded the previous Answers as unsatisfactory) are full particulars or details of the breach alleged here. In my view, there is a failure to provide full and proper particulars.

(3) Request 5(5)

26. As in the case of Request 2, the defendant has provided the same particulars in the 3rd Answer as those it provided in the 2nd Answer. Again, there is a failure to comply with the Unless Order.

(4) Request 16

27. It will be recalled that the particulars requested here relate to paragraph 17 of the Defence and Counterclaim. The particulars provided in the 3rd Answer (in the attached Schedule) are, however, the same as those eventually provided in the 2nd Answer in relation to paragraph 18 of the Defence and Counterclaim. The sum claimed under paragraph 17 is $771,054.72, exactly the same as the sum claimed under paragraph 18. As Mr Stewart Wong for the plaintiff submitted, the claims under paragraph 17 and under paragraph 18 of the Defence and Counterclaim appear to be quite different in nature but, as is now clear, the claims are one and the same. In these circumstances, I am not satisfied that proper particulars have been provided under this request in relation to paragraph 17 of the Defence and Counterclaim. It will be necessary at some stage for the defendant to clarify the nature of its case.

Under the Request for Further and Better Particulars of the 1st Answer

(1) Request 5

28. No particulars were provided at all pursuant to this request.

THE CONSEQUENCES

29. There being, as I have found, a failure to comply with the Unless Order, I now turn to the consequences of this failure.

30. There is no affidavit before me explaining the reasons for this failure. I regard this as somewhat surprising. Mr Finley, who appears for the defendant, submitted that his client was undergoing a reconstruction and that there was a change of employees. This therefore, according to him, explained in part the failure to comply with the Unless Order. It was also said that some of the answers depended on information being provided by third parties.

31. These reasons, even if I were to accept them in the absence of an affidavit, go nowhere near what would be regarded as an adequate explanation for the failure to comply with the Unless Order in the present case. The Court (and the plaintiff) could have expected, given the repeated opportunities that the defendant has had to provide full and proper particulars over a period of some six months, better reasons than these.

32. The defendant has therefore not satisfied the requisite test laid down in the authorities. The consequence is that the sanctions set out in the Unless Order dated 3 December 2001, should be imposed and given effect.

33. I have earlier mentioned as part of my Order that paragraph 2 of the Prayer to the Defence and Counterclaim should also be struck out. Although this was not originally in the summons before me (and Mr Finley resisted its introduction), I am persuaded that ultimately it follows from the striking out of the other parts of the Defence and Counterclaim that this paragraph should also be struck out. The striking out of the other parts of the Defence and Counterclaim (especially paragraph 17) does not enable this paragraph to be free-standing. The only claim for damages pleaded is paragraph 18 which is a claim for this specific amount of $771,054.72.

34. In relation to the order for costs on an indemnity basis, it is implicit in my judgment that the failure to comply with the Unless Order was intentional and contumelious. In these circumstances, it is appropriate that there should be an order that the defendant pays to the plaintiff costs on this basis.